Are they going to peg all the banks? Why, they could buy ground and build a new Mississippi cheaper. They are pegging Bulletin Tow-head now. It won’t do any good. If the river has got a mortgage on that island, it will foreclose, sure, pegs or no pegs.

When I last checked the Internets last night, markets were booming in Asia, and US futures were soaring. All in response Turkey’s central bank, which raised its interest rate benchmark to north of 12 percent. Unheard of territory.

The rate hike was meant to attract capital to into Turkey. With interest rates on “safe” investments–government bonds–remaining at historic lows, an offer 12 percent would seem like a windfall for people sitting on globs of cash (borrowed from governments).

I started this note with quotes from two prominently bearish money managers – Jeremy Grantham and Hugh Hendry – both of whom are throwing in the towel on the upward trajectory of the market in the face of inexorable government bond-buying. Their change of heart reflects (finally and begrudgingly) the overwhelmingly dominant Narrative of Central Bank Omnipotence, that for better or worse it is central bank policy (particularly the Fed’s QE policy) that determines market outcomes.

Experts Tamed the Mississippi 130 Years Ago, Don’cha Know

In Life on the Mississippi, Mark Twain takes readers up and down the Mississippi. He takes us on this trip as a historian, then as a young man in love with the river, and, finally, as an old man on a nostalgia trip to New Orleans.

We learn that between Twain’s last trip as a pilot on the Mississippi and the time of his later voyage, the Army Corps of Engineers has tried to tame the mighty river. But an old pilot, Uncle Mumford, offers Twain his opinion. The engineers are smart fellows, Mumford admits; smarter than he. And West Point taught them more about the river than Mumford could comprehend.

But the engineers didn’t live on the river the way Mumford had. They didn’t know the river. The learned about the river.

Mumford’s warning, “If the river has got a mortgage on that island, it will foreclose, sure,” foreshadowed the floods of 1993. That’s what inspired me to read the book, and that quote was the main learning I took from it. Warning of foreclosure stuck with me.

Question Expert Consensus

From a rooftop smoking lounge at work, we could see the price at QuikTrip. Every day in 2008, the price went up. Every day, we expected to see it fall. Finally, we all gave up because, according to the USAToday headline of June 12, 2008: “Oil Experts Contend High Energy Prices Are Here To Stay.”

But the experts were wrong. And shortly after those experts reached consensus, the market reversed. By the time trees were turning in the fall, that QuikTrip sign dropped under $1.50.

This chart shows gasoline prices in the US at key points during 2008. Remember, the experts reached consensus in June.

July 7, 2008—Crude oil prices settled-in at a new record of $147 per barrel. The U.S. average price for regular gasoline climbs to an all-time high of $4.11 per gallon. Road trip style vacations are put on hold for many summer travelers.

Sept. 15, 2008—The barrel continues to drop below $100 a barrel for the first time in six months. The idea of a serious financial industry recession is discussed as the market literally begins to melt down!

Oct. 16, 2008—Oil prices fall below $70 a barrel, which is less than half of its July peak. Signs of $1.99 a gallon gas brings celebration to the masses. Some consumers begin to talk about dragging out their gas guzzling SUV’s and Winnebago’s for the first time in months.

In the present case, the experts are central bank planners. They want to control the world’s economy. They believe their expertness allows them manipulate the economy any way they want.

But they can’t. No more than the Army Corps of Engineers could keep the Mississippi from foreclosing on its mortgage. No more than oil experts could keep the price of gasoline rising. No more than the Soviets could command a robust and growing economy with toilet paper for all.

Yes, power allows central planners to control aspects of the economy for periods of time. But the forces underlying the economy don’t stop moving. Pressure doesn’t stop building. It’s simply contained, like the water of a giant river, or the cap on a super volcano.

When outside forces that the planners can’t control or didn’t know about strike the planned economy, the dam bursts, the cap ruptures, the economy crashes.

I’m not sure we’re witnessing the rupturing of the central banks’ plan. This could be just a temporary blip.

Even if this isn’t “the big one,” though, the big one’s coming.

The central bankers have run up a massive mortgage that all the people alive on earth cannot repay in a lifetime. No central planner in history ever kept control forever, and no pegs ever kept a river in its banks for good.

Last week, Pope Francis all but denounced free market capitalism as a sin. Luckily, he wasn’t speaking from the Seat of Peter, but from his own misguided view of the world.

Much of Francis’s statement gives important and honest direction to a world consumed with fame and money. The Pope is right in decrying systems in which money is the ruler instead of a means to an end. And he’s right in describing the inhumanity of a system that protects the wealthy against loss.

Human beings are themselves considered consumer goods to be used and then discarded. We have created a “throw away” culture which is now spreading.

I joined the Conscious Capitalism movement precisely to fight against the evil of crony capitalism. Crony capitalism–which was called “fascism” in the last century–dehumanizes, exploits, and extracts the life of individuals for some common “good” defined and defended by the elite. The Conscious Capitalism Credo says:

We believe that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence and it is heroic because it lifts people out of poverty and creates prosperity. Free enterprise capitalism is the most powerful system for social cooperation and human progress ever conceived. It is one of the most compelling ideas we humans have ever had. But we can aspire to even more.

I believe that credo. Every word of it. Apparently, the Pope believes something else.

His targeted assault on the world’s only means of producing wealth goes too far and too wrong.

Not that free markets don’t have their problems. The naked pursuit of profits is killing liberty and feeding the beast of government. But Pope Francis doesn’t look at pictures that large, apparently. He looks at results and assumes causes.

Here are three specific errors in Pope Francis’s attack on capitalism.

1. Francis Errs in Understanding Free Markets

Francis assumes that “trickle down” economics and free market capitalism are the same thing. They’re not. The divergence in wealth between the top 0.1% and the rest are not the result of unfettered capitalism but of unfettered government. Free markets do reward some merchants above others, but they also exact dire consequences for merchants and bankers who screw up. Only governments can save failed businesses. And governments have.

Since the global financial crisis (and long before), governments have mortgaged the young to feed the old and rich. Governments–the entities Francis would trust with everything–redistribute wealth from future generations to dying ones. And, apparently, the Pope likes that. Or maybe he just doesn’t understand what free market capitalism is.

2. Francis Errs in Asserting that Free Markets Have Never Lifted People Out of Poverty

Aid is just a stop-gap. Commerce [and] entrepreneurial capitalism takes more people out of poverty than aid. In dealing with poverty here and around the world, welfare and foreign aid are a Band-Aid. Free enterprise is a cure. Entrepreneurship is the most sure way of development.

The United States generated more wealth than any nation in the world’s history. And we’re the most generous. Not just with our money, but with our time. Americans lead the world in per capita giving and in hours of volunteer work.

Without the excess wealth generated by ingenuity and industriousness, we would have nothing to give and no time to help. And free markets–the chance to bring great ideas to the world and earn a reward for doing so–drives that behavior.

3. Mostly, Francis Errs in Trusting Government

Francis says that “trickle down economics expresses a crude and naïve trust in the goodness of those wielding economic power.” By implication, he, instead, places crude and naïve trust in the goodness of those wielding military, taxation, and police power. Has he heard of the IRS? The NSA? Has he read about Obama’s lies and the millions Obama has left without insurance?

Yes, capitalism is sick these days. It’s infected with the virus of government. The answer isn’t to outlaw free markets, as the Pope would, but to constrain and manage government.

**UPDATE**

Sheldon Richman makes an excellent point over on Reason.com:

When I say the pope gets some things right, just not in the way he intends, here’s what I mean: In an important sense, we do have “an economy of exclusion and inequality.” But it is not the free market; rather, it’s interventionism, corporatism, crony capitalism, or just plain capitalism — that is, the abrogation of the free market on behalf of special, mostly business, interests. The reigning system is riddled with exclusion and inequality, the victims of which are society’s most vulnerable people. It’s easy to overlook this because the system produces a great volume and variety of consumer goods that even low-income people can afford. (The system needs consumers, though without intervention we could expect prices to be lower.)

But you don’t have to take my word for it. Listen to Geoffrey Canada and Stanley Druckenmiller, partners in one of the most successful hedge funds in the world. And recipients of the money the government’s stealing from kids.

President Barry Mills moderated the discussion “Generational Theft: How Entitlement Spending is Stealing Opportunity from America’s Youth,” among educator Geoffrey Canada ’74, investor Stanley Druckenmiller ’75 and members of a packed Pickard Theater audience who posed questions to the duo.

Their visit to campus May 7 follows a Wall Street Journal op-ed piece in which they write of their shared concern that “government spending levels are unsustainable.” Canada and Druckenmiller, though from different backgrounds and with different political beliefs, have united to bring their message to the masses, appearing on CNBC’s Closing Bell and Squawk Box, and MSNBC’s Morning Joe. They warn that failing to reform an entitlement culture, reaffirm long-run objectives, and re-establish a common purpose will mean diminished opportunities for America’s youth.

That’s from Yanis Varoufakis, professor of economics at Athens University. It explains what’s going on throughout Europe in the United States.

Top bankers and politicians created a phony wealth system that crashed. Or is crashing. Instead of letting it crash and rebuilding on sound economics, the big bankers and politicians are a) loading us up with debt, or b) confiscating our savings.

Throughout all of this, the global elites have displayed consistently worsening signs of decadence, psychopathic tendencies, and overall detachment from reality.

The core problem here is that Westerners have ceded almost all political and economic power to the elites. Representative democracy was designed to prevent elites from accumulating power, but it only works if people hold onto their power jealously. Here’s how William F. Buckley put it in Up From Liberalism:

I will not cede more power to the state. I will not willingly cede more power to anyone, not to the state, not to General Motors, not to the CIO. I will hoard my power like a miser, resisting every effort to drain it away from me. I will then use my power as I see fit.

Buckley is dead, and so is his ethos.

Debt hasn’t diminished since the crisis began. It’s grown like an infected boil on the face of democracy.

As massive debts accumulate to governments and ever larger banks, the temptation among the elites to rob the rest of us grows stronger. And the longer we wait to pop this zit, the deadlier the pus explosion when it ruptures.

“We’re all sitting on the sidelines right now wondering what’s going to happen to us,” said John Odland, chief financial officer at MacMillan-Piper Inc., a freight-transport firm in Seattle. “A lot of my contemporaries are feeling the same way, saying, ‘Let’s just wait and see what these knuckleheads do.’ “

Why should private, free citizens have to wait on government for anything?

Here’s a better solution: get the damn government out of the economic planning business.

It’s true that individuals are no better at planning than government experts. But they’re no worse, either. The difference, then, is the number of people affected by a plan that doesn’t work.

If Joe Shit the Ragman’s plan for his business or his family or his vacation fails, who’s affected? Joe, maybe his wife, maybe his employees. And it stops there.

If Barack Obama’s plan or Ben Bernanke’s plan or Tiny Tim Geithner’s plan for the economy fails, who’s affected? All of us.

Moreover, if Joe’s plan fails, it’s up to him and him alone to sacrifice while a better plan takes shape for him and is family.

But if a government plan fails, the government invents new powers, which always come at the expense of your personal power, new taxes, and new plans. From the same WSJ article:

Each scenario involves prolonged uncertainty. Most consumers would start to pare their spending after receiving smaller paychecks due to higher payroll-tax withholding. Income-tax refunds for 2012 could be delayed while the Internal Revenue Service programs its computers to account for tax changes. Government agencies could start cutting back, hurting employees and suppliers. Many other employers likely would slow hiring or cut jobs. And investors could eventually look at those risks and send stocks lower, threatening a downward spiral in consumer and business spending.

We are throw more than good money after bad; we are throwing away good lives after bad.

The only solution to the fiscal cliff problem is to STOP CENTRAL PLANNING, restore power to individuals to make decisions, and reinvigorate a sense of community so people are more likely to help their neighbors.

If you think federal regulation is bad today, just wait. You ain’t seen nothin’ yet.

By the EPA’s own reckoning, the rule if implemented annually would cost American businesses $90 billion. But a related rule due to be taken up in December similarly would declare large swaths of the U.S. “closed for new business” until emissions are reduced to meet lower caps than exist today, says Anne Kolton, spokeswoman for the American Chemistry Council.

Those are just two of 600+ EPA regulations that the Obama Administration put on hold until after the election. (Source: Barrons)

From Enterprise Zones To Economic Dead Zones

Some of these regulations would put an outright ban on any new businesses across huge chunks of the United States. Others would shut down the coal industry, once and for all, throwing tens of thousands of workers into long-term unemployment.

These regulations will begin rolling out this month. That’s another reason why smart businesses are stashing their cash. They have no idea what the regulations will mean to them.

Stocks Get Hammered

The DJIA fell more than 300 points today in the euphoria of Obama’s re-election. If these regulations hit the books, we might not see 13,000 Dow for a decade.

America is suffocating under an amazing tax burden, but most Americans STILL underestimate how much their tax bill really is. That’s because Washington has done a fantastic job of forcing employers to hide most of the taxes you pay. If people had to see and deal with their total liability, the Democratic Party would be swept into the dust bin of history.

Only 54% of Americans are aware that employers pay payroll taxes on their behalf

Of those who do understand this, on 18% grossly underestimate the dollar amount of the taxes their bosses pay on their behalf

Only 10% of Americans have a basic understanding of the tax burden placed on their employer on their behalf

I heard a caller to Rush Limbaugh a few weeks ago. He was a painting contractor who’d been in business for 20 years. He is shutting down his company. The combination of a horrible economy and the burdens of even more taxes on business, the added regulation under Obama’s administration, the burden of an onerous Obamacare tax avalanche, have combined to make it almost impossible to run a small business—unless that business services the government.

Liberalism is the original good intention that paves the road to Hell.

We can’t blame all the problems with central planning on Obama. But we can and should hold Obama to account for shoving a failed system of misery down America’s throat. We can point out that the man who claims government, not people, build businesses and create jobs is incapable of keeping even his softest promises of eight percent unemployment and a slowly recovering economy. We can and should remind everyone that the man who wants to control all of the US economy struggles to manage the economics of his campaign.

Barack Obama did not invent the failed ideology of central planning, but as its leading proponent he deserves to suffer the same fate his policies have given to the US economy.

I love some things about Business Insider. Mostly its great headlines.

Unfortunately, sometimes its writers show an ignorance of basic economics in their rush to catapult Obama to a second term. Joe Weisenthal is just the latest example.

Joe tries to claim that economic recovery in the US is retarded by loss of public sector jobs.

What Joe doesn’t seem to get is this: the private sector pays for those public sector jobs.

I’ll break it down for the journalism majors.

The only thing that governments produce that the market values is security. People will pay for military, intelligence, police, fire, and prisons. That’s why the founders and the philosophers they quoted talked endlessly about government’s limited role of preserving liberty, peace, contracts, and safety. So the market will pay for those things.

Everything else government does is overhead.

In good times, the people who actually produce our GDP, private sector workers plus government security workers, put up with massive, overbearing government overhead. We shouldn’t but we do.

When times get bad, though, we stop paying for the luxury of government overhead. The private sector can’t afford to pay for government services that the market refuses to buy from private providers.

The charts Weisenthal posted are meaningless. They show only that a bloated public sector is shrinking as the market refuses to support wasteful government programs and bureaucracies. Considering that government employees earn double what private sector workers make, anyone can understand why this country’s producers have had it with big government.

Bottom line: government work does not grow the economy, except for security, so every job gained in the public sector is future opportunity denied in the overall economy.